Pillar 3 disclosures

Macquarie Capital (Europe) Limited March 2019 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com

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Contents

1.0 Overview 2 2.0 Risk Management 3 3.0 Remuneration 5 4.0 Governance Arrangements 6 5.0 Capital Adequacy 8 6.0 Credit Risk Management 10 7.0 Market Risk Management 11 8.0 Operational Risk Management 14 9.0 Exposure classification and Credit Risk Mitigation 15 10.0 Leverage Ratio 19 11.0 Asset Encumberance 22 12.0 Capital Buffers 24 Disclosure 25 Appendix 1 26

1 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 1.0 Overview

This disclosure is in relation to Macquarie Capital (Europe) Limited (“MCEL”). MCEL is a UK incorporated company, authorised by the Financial Conduct Authority (“FCA”) as a full scope investment firm, and is regulated under the Capital Requirements Directive IV (“CRD IV”) package (consisting Directive 2013/36/EU (“CRD”) and Regulation (EU) No 575/2013 (“CRR”) and as implemented in part by the FCA under the Prudential sourcebook for Investment Firms (“IFPRU”). These regulations are structured in line with Basel Committee’s three Pillars of supervision: Pillar 1 “minimum capital requirements”, Pillar 2 “supervisory review process” and Pillar 3 “market discipline”. MCEL is ultimately owned by Limited (“MGL”). MGL is a large financial conglomerate, authorised and regulated by the Australian Prudential Regulation Authority (“APRA”) as the non-operating holding company of an Australian deposit-taking institution. MCEL is required to produce its Pillar 3 disclosures in accordance with Part 8 of CRR. These requirements are supplemented by the guidelines published by the European Banking Authority (“EBA”). This document sets out the Pillar 3 disclosures for MCEL as at 31 March 2019. The disclosures for MCEL are prepared on an individual basis or solo basis.

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2.0 Risk Management

All MGL subsidiaries, including MCEL, are subject to Macquarie’s risk management framework. This framework has been endorsed by the MCEL Board. Macquarie’s risk management framework consists of systems, structures, policies, processes, people and culture. It is through this framework that Macquarie is able to identify, measure, evaluate, monitor, report, manage and ultimately accept risk. Acceptance of risk is an integral part of Macquarie’s operations. Strong independent prudential management has been crucial to Macquarie’s success and stability over many years. The risk management framework assigns clear risk roles and responsibilities represented by the ‘three lines of defence’. Primary responsibility for risk management lies at the business level. This is the first line of defence. Part of the role of all business managers throughout Macquarie is to ensure they manage risks appropriately. The Risk Management Group (“RMG”) forms the second line of defence and independently assesses all material risks. The third line of defence, which includes internal audit, independently reviews and challenges Macquarie’s risk management controls, processes and systems. Macquarie’s core risk management principles have remained stable, and are applied by MCEL as follows: – Ownership of risk at the business level MCEL business heads are responsible for identifying risks within their businesses and operations and ensuring appropriate management. Before taking decisions, clear analysis of the risks is sought to ensure those taken are consistent with Macquarie and MCEL’s risk appetite and strategy. Furthermore, any proposed new business activity in MCEL will be subject to Macquarie’s New Product and Business Approval (“NPBA”) process. This process is an important aspect of Macquarie’s approach to risk management, providing a well-established framework for the identification and assessment of incremental risks arising. – Understanding worst case outcomes MCEL examines the consequences of worst case outcomes and determines whether these are acceptable. This approach is adopted for all material risk types and is often achieved by stress testing. Resultant limits effectively constrain positions where the current risk appears low but potential risk exists in extreme loss events. – Requirement for an independent signoff by risk management MCEL has a strong, independent RMG that is charged with signing off all material risk acceptance decisions. RMG's opinion is sought at an early stage in the decision making process. The approval document submitted to senior management includes independent input from RMG on risk and return. Additionally, the incremental impact of any proposed new activity on MCEL’s capital position, and hence ICAAP, will be assessed by RMG as part of this process. Where that impact is considered material, it will be reported to the MCEL Board. MCEL’s risk appetite is the degree of risk that MCEL is willing to accept in pursuit of its strategic objectives. This is detailed in MCEL’s Board approved Risk Appetite Statement (“RAS”), which describes: – MCEL’s risk appetite, being the nature and amount of risk that Macquarie is willing to accept in pursuit of its strategic objectives – the risks MCEL is not willing to accept; – the processes that MCEL has established to maintain and monitor compliance with risk appetite; and – the timing and process for review of MCEL’s risk appetite. Business divisions operating through MCEL are required to act in adherence with the MCEL RAS. On an annual basis, the MCEL RAS is presented to MCEL Board who review the risk management arrangements for MCEL, including the appropriateness of risk appetite for MCEL, which are used to embed, set and monitor risk appetite for MCEL’s material risks. The MCEL Board has formally adopted the MCEL RAS. MCEL has adopted a range of principles which govern the firm’s overall approach to risk acceptance. These principles are taken into consideration by all businesses and control functions when the firm considers accepting risk in pursuit of MCEL’s strategic objectives. These principles are consistent with the wider Macquarie Group Risk Appetite principles. MCEL’s risk appetite reflects that it only has appetite to accept risks that are consistent with the following principles which apply across the Macquarie Group: ‘Risk taking must be consistent with What We Stand For and our Code of Conduct’ MCEL only has appetite for taking risks in a manner which is consistent with the core principles expressed in Macquarie’s What We Stand For and Macquarie’s Code of Conduct. Opportunity, accountability and integrity are the principles which form the basis of all our actions.

MCEL seeks to establish and maintain an appropriate and effective risk culture. This is the foundation of Macquarie’s risk management framework and is critical to MCEL’s success. We demonstrate our established risk culture by the way we behave every day.

3 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 2.0 Risk Management continued

Risks must be consistent with our strategic intent MCEL only has appetite for risks which are consistent with its strategic intent. Risks must be well understood All risks are comprehensively understood before being accepted. Risks are owned at the business level and all material risk acceptance decisions are independently signed off by RMG. Risks must generate returns in proportion to their risk MCEL only has appetite for risks where the financial or other returns are commensurate with the risks – both expected and unexpected. A risk and return analysis is performed for all businesses and transactions, which includes an assessment of worst-case outcomes. Further information on Macquarie’s risk management framework can be found in the Macquarie Group Limited’s 2019 Financial Statements at: – www.macquarie.com.au/mgl/au/about-macquarie-group/investor-relations/financial-disclosure/ financial-reports/macquarie-group-limited-mqg – www.macquarie.com/uk/about/company/risk-management-at-macquarie Regular reports are produced covering compliance, prudential, market, and operational risks to facilitate the ongoing monitoring of key risks and ensuring that any breaches, are escalated to the appropriate level of management. Regular reports are also produced to monitor the liquidity and capital position of MCEL, including total capital ratios, liquid assets and large exposures. The risk information is included in a Risk Management Group report which is presented at the quarterly MCEL Board meetings in order to facilitate the information flow on risk to the management body. MCEL’s management body provides feedback on reporting and its content on an ongoing basis and this is particularly considered when new business lines are commenced. In addition, the annual board evaluation process includes consideration of the appropriateness of Board papers. Additionally, MCEL’s overall risk profile is assessed through the comprehensive risk assessment process as part of MCEL’s Internal Capital Adequacy Assessment Process (“ICAAP”) which is reviewed, challenged and approved by the MCEL Board at least annually as part of the business planning cycle, or following any significant change to the business strategy and/or risk profile of MCEL. ICAAP MCEL’s ICAAP is prepared in accordance with Article 73 of the CRD, as implemented in IFPRU 2.2 of the FCA Handbook. The ICAAP sets out the means by which MCEL identifies and manages its key risks, and also details the required level of regulatory capital for MCEL to meet its regulatory minimum (and internal target) requirements over a three year forecast period in both base and stress cases. The ICAAP is part of MCEL’s overall risk management framework. Its key features include: – comprehensive risk assessment process; – internal assessment of capital adequacy; – financial and capital forecasts; – business strategy and growth plans; – the impact of a three year downturn stress scenario; and – wind down analysis. MCEL’s ICAAP summary document is reviewed, challenged and approved by the MCEL Board.

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3.0 Remuneration

Please refer to MCEL’s Pillar 3 Remuneration Disclosures for information on MCEL’s remuneration policy and practices. www.macquarie.com/uk/about/investors/reports

5 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 4.0 Governance Arrangements

Details of the Directors of MCEL as at 31 March 2019 are set out below:

Number of total directorship Name Role Background appointments George Alford Non-Executive George Alford joined the MCEL Board of Directors in July 2018 2 Director and as a Non-Executive Director. George was further appointed as Chair Chair of MCEL in September 2018. George has over 40 years’ experience in in both executive and non-executive roles, including at Kleinwort Benson Group, Financial Services Authority (formerly of England) and Plc. David Fass Executive David Fass joined the MCEL Board of Directors in July 2011. 12 Director David joined Macquarie as CEO for EMEA in 2011. David’s career began on Wall Street at Paine Webber (UBS) and JPMorgan (Chase Manhattan Bank) before moving to to work at European Media and Telecoms . David then spent 11 years at where he held various senior management and client-facing roles. Paul Plewman Executive Paul Plewman joined the MCEL Board of Directors in October 20 Director 2018. Paul joined Macquarie in 2005 and is the Head of Commodities and Global Markets (“CGM”) EMEA. Paul holds a BA in Computer Engineering and Mathematics and previously held senior leadership positions at Investec and the Group. Kathryn Burgess Executive Kathryn Burgess joined the MCEL Board of Directors in March 15 Director 2017. Kathryn joined Macquarie in 2000 and has been the CFO of EMEA since 2017. Prior to joining Macquarie, Kathryn worked in Tax. Kathryn is a Chartered Accountant. Daniel Wong Executive Daniel Wong joined the MCEL Board of Directors in January 10 Director 2016. Daniel joined Macquarie in 1999 and is the Global Co- Head of the Infrastructure and Energy Group for Macquarie Capital. Daniel holds Bachelor of Commerce and Bachelor of Laws and has led and overseen transactions across a range of sectors and markets, including some of Macquarie’s most significant infrastructure investments. As per MCEL’s Board Charter, the minimum number of directors is three and the majority of directors must be resident in the United Kingdom. It is intended that the following be members of the MCEL Board: – Head of Macquarie Capital, Europe; Head of Commodities and Global Markets, Cash Equities, Europe; – CEO EMEA Macquarie Group; and CFO EMEA Macquarie Group. As at 31 March 2019, MCEL did not have a separate risk or remuneration committee.

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4.0 Governance Arrangements continued

Macquarie has a Nominee Directors & Officers Policy to ensure that only persons with sufficient seniority and experience are nominated to the Boards of Macquarie entities with appropriate consideration of the relevant regulatory and statutory requirements. In addition, Macquarie’s Suitability and Diversity Guidelines as formulated for management bodies of entities that are subject to the requirements of the ESMA and EBA joint guidelines on the assessment of the suitability of members of the management body and key function holders have been adopted by the MCEL Board (the “S&D Guidelines”). These S&D Guidelines provide that directors of MCEL should be suitable at all times and should be reassessed periodically. Suitability in this context includes, but is not limited to, the following criteria: – Being of good repute; – An ability to act with honesty, integrity and independence of mind; – Overseeing, monitoring and challenging management decision making effectively; – The possession of sufficient knowledge, skills and experience to perform their duties; – Disclosing any financial or non-financial interests that could create potential conflicts of interest; – Being able to commit sufficient time to perform management body functions in a supervisory context; and – Not being restricted from taking the position by any regulatory requirement. MCEL selects its members in accordance with the S&D Guidelines and as per the global workforce diversity policy for the Macquarie Group. The Workforce Diversity policy is intended to define Macquarie’s commitment to workforce diversity and the structures in place to ensure it is realised. The principles contained in Macquarie’s Workforce Diversity policy are available at: https://www.macquarie.com/uk/about/company/diversity-and-inclusion Macquarie governance procedures are designed to facilitate constructive challenge and debate amongst the management body, based on a range of perspectives and viewpoints. However, in order to further encourage diversity of opinion and debate, avoid group-thinking and to promote sound governance outcomes diversity aspects including but not limited to the following will be taken into account by the management body of MCEL when changing and / or assessing their composition, in accordance with the S&D Guidelines: – Gender; – Educational and professional background; – Age; – Ethnicity; – Geographical provenance; – Professional experience; and – Tenure and personal background. When recruiting Directors for the MCEL Board, the above mentioned suitability and diversity aspects, as well as Macquarie’s wider policy and risk management framework requirements, will be taken into account, whether for executive or non- executive appointments. It is acknowledged that executive members of management bodies are typically nominated by virtue of their executive duties and in accordance with the requirements of the Nominee Directors & Officers Policy. Management body suitability and diversity is therefore closely linked to the suitability and diversity of senior management.

7 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 5.0 Capital Adequacy

Capital Resources and Key Capital Ratios MCEL’s regulatory capital resources are solely in the form of Common Equity Tier 1 (“CET1”), comprising ordinary share capital, equity contribution and reserves less retained losses. CET1 capital is to only account for externally verified (audited) retained earnings, and foreseeable dividend payments. MCEL’s capital ratios are calculated in accordance with CRR Article 92 – Capital Resources divided by the Total Risk Exposure Amount (“TREA”). Given that MCEL’s Capital Resources are solely in the form of CET1 capital instruments, its CET1 Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratios are equivalent. Under CRD IV (as implemented under IFPRU 10), the minimum capital requirements under CRR Article 92 are supplemented by the following – – Capital Conservation Buffer (“CCoB”) – The CCoB is a buffer for all firms that can be used to absorb losses while avoiding breaching minimum capital requirements. The CCoB is to be comprised entirely of CET1 and was phased in at 0.625% of the RWAs each year from 1 January 2016, until it was fully phased in at 2.5% of the RWAs from 1 January 2019. – Countercyclical Capital Buffer (“CCyB”) – The CCyB can be varied over time. The primary objective of the countercyclical capital buffer is to ensure that the banking system is able to withstand stress without restricting essential services, such as the supply of credit, to the real economy. Each firm’s CCyB depends on its weighted average CCyB rate determined according to the CCyB rates that apply in the jurisdictions in which the bank has relevant exposures. – Systemic buffers ("G-SIIB" and "SRB”) – The systemic buffers apply only to globally systemic or ring-fenced banks, and are therefore not applicable to MCEL. – Individual Capital Guidance (“ICG”; “Pillar 2A”) – ICG is the guidance given to a firm about the amount and quality of capital resources that the FCA thinks it should hold at all times under the Overall Financial Adequacy Rule. This is assessed as part of the ICAAP and FCA’s periodic supervisory review and evaluation process (“SREP”). Pillar 2A capital requirements capture the risks that are not assessed to be adequately covered under the Pillar 1 capital requirements. Pillar 1 and Pillar 2A capital requirements together constitute the ICG. – Capital Planning Buffer (“CPB”; “Pillar 2B”) – The CPB is an amount separate, though related to, the ICG, whereby CPB is the amount and quality of capital resources that a firm should hold at a given time in accordance with the General Stress and Scenario Testing Rule, so that the firm is able to continue to meet the Overall Financial Adequacy Rule throughout the relevant capital planning period in the face of adverse circumstances, after allowing for realistic management actions. Minimum Regulatory Capital (Pillar 1) Requirements MCEL’s Pillar 1 capital resource requirement is calculated under the IFPRU rules as the higher of: – €730,000; and – 8% if the Total Risk Exposure Amount as calculated per Article 92(3) of the CRR. Further details on the approach and methodology applied for the calculation of the risk methodologies is provided below and in subsequent sections. Credit Risk: MCEL calculates its Pillar 1 capital requirements for credit risk exposures under the standardised approach, per Part Three, Title II, Chapter 2 of the CRR. MCEL calculates its Pillar 1 capital requirements for counterparty credit risk exposures under the mark-to-market approach, per Article 274 of the CRR; and exposures to central counterparties per Part Three, Title II, Chapter 6, Section 9 of the CRR. MCEL currently holds no securitisation exposures. Where forms of credit risk mitigation are applied to MCEL’s credit and counterparty risk exposures, this is done in accordance with Part Three, Title II, Chapter 4 of the CRR. Market Risk: MCEL calculates its Pillar 1 capital requirements for market risk positions under the standardised approach, per Part Three, Title IV, Chapters 1-4 of the CRR. Specifically, MCEL calculates its: – General interest rate position risk requirement ("PRR") under the maturity-based calculation, per Art. 339 of the CRR; – Equities PRR per Part Three, Title IV, Chapter 2, Section 3 of the CRR; – Delta-plus approach for non-delta risks associated with equity options, per Regulation (EU) No 528/2014; – Foreign-exchange PRR per Part Three, Title IV, Chapter 3 of the CRR; – Equities and foreign exchange PRR for positions in collective investment undertakings ("CIUs") in accordance with Art. 348(1) of the CRR; and – Commodities PRR under the maturity ladder approach, per Art. 359 of the CRR.

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5.0 Capital Adequacy continued

Operational Risk: MCEL calculates its Pillar 1 capital requirements for operational risk under the Basic Indicator Approach ("BIA"), per Part Three, Title III, Chapter 2 of the CRR. Settlement Risk: MCEL calculates its Pillar 1 capital requirements for settlement risk per Part Three, Title V of the CRR. CVA Risk: MCEL calculates its Pillar 1 capital requirements for CVA risk under the standardised method, per Part Three, Title VI of the CRR (noting the exclusions from the scope of the CVA risk Pillar 1 capital calculating in Article 382(4)). Large Exposures in the Trading Book: In accordance with Article 395(5) of the CRR, MCEL will maintain an additional capital requirement for any trading book excess to a client or group of connected clients which exceeds 25% of MCEL’s eligible capital. This additional capital requirement is calculated in accordance with Articles 397 and 398 of the CRR. As at 31 March 2019, the total capital ratio for the MCEL was 31.6% which is above the regulatory minimum required by FCA, and the MCEL Board imposed internal minimum requirement. Table 1: Capital Adequacy

31 March 31 March 2019 2018 £'m £'m Capital resources

Tier 1 Ordinary share capital (including share premium) 336.6 336.6 Audited retained earnings (140.6) (129.9) Equity contribution from parent entity 2.1 2.0 Prudent Valuation Adjustment and Reserves (2.1) (0.1) Total Tier 1 capital 196.0 208.7

Tier 2 - - Total capital after deductions 196.0 208.7

Capital resources requirement Credit risk 16.2 12.7 Settlement Risk 0.0 0.1 Market risk - Interest Rate Position Risk Requirement 0.0 0.6 - Equity Position Risk Requirement 24.6 1.9 - Forex Position Risk Requirement 1.9 0.4 - Commodities Position Risk Requirement - 27.4 Concentration risk - 0.8 Operational risk 6.8 5.7 Total capital resources requirement 49.5 49.6 Total Risk Weighted Assets 619.8 619.8

Tier 1 capital ratio 31.6% 33.7% Total capital ratio 31.6% 33.7%

Note that any figure labelled as “-“ throughout this document relates to a zero balance, whereas figures labelled as £0.0m relate to non-zero balances which round to £0.0m (to the nearest hundred thousand).

9 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 6.0 Credit Risk Management

Credit Risk As a member of the Macquarie Group, MCEL is subject to a global framework for the approval, management and reporting of credit risk exposures such as cash balances at third party banks. This includes the assessment of credit risk using Macquarie’s economic capital model that is consistent with the advanced approaches under Basel III. The MCEL Board provides oversight over the risk management framework at MCEL. RMG Credit as a Division of the Risk Management Group assists the MCEL Board in establishing and maintaining a robust framework for the management of credit risks within the entity. The Credit Risk Management Framework consists of the structures, people, policies, procedures, systems and controls that support the prudent management of credit risks. MCEL enforces a strict ‘no limit, no dealing’ principle. All proposed transactions are analysed and approved by individuals with discretion authority before they can proceed. Each proposal to incur a material credit exposure is assessed independently by RMG Credit. This assessment includes a comprehensive review of the creditworthiness of the counterparty and related entities, key risks and mitigants, and downside case scenarios. The assessment confirms consistency with risk appetite and portfolio limits. For wholesale credit exposures, the customer creditworthiness is expressed through the probability of default (MQ rating) and loss given default (LGD) which are the main inputs into regulatory and economic capital and return on risk calculations. Ratings and LGDs are derived using standardised rating scorecards that are tailored to specific types of counterparties to ensure comparability of creditworthiness. RMG Credit monitors the performance of counterparties on an ongoing basis to ensure any deterioration is identified and reflected in an adjustment to limits, MQ rating, LGD and other customer attributes. This is done, as applicable to the counterparty, through monitoring of covenant compliance and review and analysis of a variety of sources including publicly available information specific to the counterparty (such as share price and CDS spread movements), annual reports, financial statements, media releases, the macroeconomic environment, industry variables, regulatory changes, market updates, and private information received from the counterparty. RMG Credit also maintains close contact with the relevant businesses and in some instances, direct contact with the client. At a minimum, full counterparty reviews must be completed every 12 months. Additional details on impaired exposures, past due exposures and provisioning is set out in the MCEL group financial accounts on the UK Companies House website, notes 24 and 2 respectively. The MCEL Group did not have any specific provisions as at 31 March 2019. Note MCEL does not trade in any credit derivatives. Counterparty Credit Risk The counterparty credit risk exposures in MCEL are immaterial and primarily relate to exchange traded derivatives (Futures) conducted through the entity. Security Valuation MCEL holds collateral to mitigate risks in individual facilities. This usually takes the form general or specific security agreements over assets, insurance arrangements or guarantees or cross-collateralisation arrangements involving third parties. Where estimated future flows of income and principal reflect collateral held against potential credit losses, the assessment of that collateral and in particular the valuation of assets taken as security is significant for the measurement of impaired assets, provisions and capital. MCEL’s approach to valuing collateral is described in the Macquarie Valuation Policy. Specific Wrong Way Risk RMG Credit and the front office are responsible for ensuring MCEL is not exposed to specific wrong way risk. Specific wrong way risk arises if future exposure to a specific counterparty is highly positively correlated with the counterparty’s probability of default.

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6.0 Credit Risk Management continued

Table 2: Geographic and Sectoral Breakdown of External Fees Receivables as at 31 March 2019 and 31 March 2018 31 March 2019 31 March 2018 Exposure Exposure Exposure class Location £'m £'m Corporates Americas 1.3 0.5 Africa - - Asia 0.2 0.3 - - Europe 12.7 17.4 Exposures in default Americas - 0.0 Asia 0.2 0.7 Europe 1.1 15.2 Claims on institutions and corporates with a Australia - - short-term credit assessment Europe - 0.8 Grand Total 15.5 34.9

Note - The amount provisioned for in the exposure class ‘Exposure in default’ has been excluded from the above table.

11 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 7.0 Market Risk Management

Market risk is the risk of adverse changes in the value of MCEL’s trading positions as a result of changes in market conditions. MCEL’s key market risk components relate to: – Equities and foreign exchange risk on global equities, equity futures and exchange-traded funds held in its facilitation and market making books; – Commodities risk from directional views in the financial freight market through financial contracts; and – Interest rate risk on forward financial contracts. MCEL may also face market risk on any net underwriting positions it holds and may also incur small levels of foreign exchange risk on cash balances denominated in foreign currencies. As a member of the Macquarie Group, MCEL is subject to a global framework for the approval, management and reporting of market risk exposures. Further information about MCEL’s approach to market risk can be found in Macquarie Group’s Annual Report (see Section 1). Aggregate market risk is constrained in MCEL by two risk measures - Value at Risk (VaR) and the Macro-Economic Linkages (MEL) stress scenarios. The VaR model predicts the maximum likely loss in MCEL’s trading portfolio due to adverse movements in global markets over holding periods of one and ten days. The MEL scenario uses the contingent loss approach to capture simultaneous, worst case movements across all major markets. Whereas MEL focuses on extreme price movements, VaR focuses on unexceptional changes in price so that it does not account for losses that could occur beyond the 99% level of confidence. Stress testing therefore remains the predominant focus of RMG as it is considered to be the most effective mechanism to reduce Macquarie’s exposure to unexpected market events. Value at Risk Model MCEL uses Macquarie’s VaR model to provide a statistically based summary of overall market risk in the entity. The VaR model uses a Monte Carlo simulation to generate normally distributed price and volatility paths for approximately 5,700 benchmarks, using volatilities and correlations based on three years of historical data. Emphasis is placed on more recent market movements to more accurately reflect current conditions. The benchmarks provide a high level of granularity in assessing risk, covering a range of points on yield curves and forward price curves, and distinguishing between similar but distinct assets. Exposures to individual equities within a national market are captured by specific risk modelling incorporated directly into the VaR model. The integrity of the VaR model is tested against daily hypothetical and actual trading outcomes (profit and loss). Backtesting results are reviewed by Macquarie’s Market Risk Committee and reported to the Australian regulator (APRA), on a quarterly basis. Macro Economic Linkage Model MEL scenarios are large, simultaneous, ‘worst case’ movements in global markets. The MEL scenarios consider very large movements in a number of markets at once, based on Macquarie’s understanding of the economic linkages between markets. The MEL scenarios reflect a market ‘shock’ or ‘gap’ as opposed to a sustained deterioration. RMG Market Risk monitors MEL and VaR exposures on a daily basis, with quarterly reporting to the MCEL Board. MCEL calculates its market risk capital requirement using the standardised approach as laid out under the CRR. As at 31 March 2019, MCEL’s market risk capital requirement amounted to £26.0m. Table 3: Market risk capital requirements £’m RWAs Capital requirements

Interest rate risk (general and specific) 0.2 0.0 Equity risk (general and specific) 307.4 24.6 Foreign exchange risk 23.7 1.9 Commodity risk - - Total 331.3 26.5

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7.0 Market Risk Management continued

Interest Rate Risk in the Non-Trading Book (“IRRBB”) IRRBB is the risk of losses arising from changes in the interest rates associated with banking book items. MCEL has minimal exposure to IRRBB as the primary activities undertaken within MCEL relate to trading activities and corporate advisory. IRRBB may arise through loan assets within the Macquarie Capital business unit, and also through potential mismatches between base rates charged on intercompany lending facilities provided to MCEL vs. rates earnt by MCEL on intercompany or external cash deposits. MCEL is subject to Macquarie’s management and reporting framework for interest rate risk in the non-trading book. Macquarie’s approach is that business units do not take outright interest rate risk and that, wherever possible, interest rate risks arising in MCEL are to be transferred out of the non-trading book and managed within traded market risk limits. Any residual interest rate risks are subject to limits that are approved and monitored by RMG, and are included in interest rate risk calculations at the Macquarie Group level. Macquarie’s internal model sums the change in economic value arising from the following risk categories: – Repricing & (parallel and non-parallel moves); – Basis (imperfect correlation between indices of the same tenor); – Optionality (breakdowns in assumptions used for hedging); and – Embedded gains and losses (difference between the fair-value and book-value arising from past interest rate movements). To the extent that any interest rate exposures remain in MCEL, MCEL calculates its risk position using the standard approach for assessing Pillar 2A capital for IRRBB. As at 31 March 2019, the IRRBB exposure in MCEL from the internal assessment remain immaterial.

13 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 8.0 Operational Risk Management

Operational risk framework Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. MCEL calculates its Pillar 1 capital requirements for operational risk under the Basic Indicator Approach (“BIA”), per Part Three, Title III, Chapter 2 of the CRR. MCEL uses the last three yearly observations from audited financial statements to calculate the average relevant indicator over this period per Article 316 of the CRR. The average of the relevant indicator is then multiplied by 15% to calculate the capital requirement for operational risk. The Pillar 1 capital requirements for Operational Risk as at 31 March 2019 were £6.8m The relevant indicator is calculated as the sum of the following: – Interest receivable and similar income – Interest payable and similar charges – Income from shares and other variable/ fixed-yield securities – Commissions/ fees receivable – Commissions/ fees payable – Net profit or net loss on financial operations – Other operating income. – Macquarie’s Operational Risk Management Framework – Operational Risk Objectives Macquarie’s Operational Risk Management Framework (ORMF) is designed to identify, assess and manage operational risks within the organisation. The key objectives of the framework are: – Risk identification, analysis and acceptance. – Execution and monitoring of risk management practices. – Reporting and escalation of risk information on a routine and exception basis. The Framework incorporates six primary pillars in the management of operational risk: – Operational Risk Policies Policies and guidelines are established to support the management of operational risks. – New Product and Business Approval (“ NPBA”) process A robust change management process to ensure operational risks inherent in new products, businesses, processes or systems and major organisational projects are identified, addressed and managed prior to implementation. – Incident Reporting and Escalation Operational risk incidents are analysed to identify lessons learned and ensure appropriate actions have been taken towards the relevant risk. – Risk and Control Self-Assessment (“RCSA”) and Control Assurance The RCSA is a formal process of risk self-assessment, designed to identify operational and compliance risks that exist in the business, and to record and assess the performance of the controls in place to mitigate those risks. Control assurance is a proactive investigation to provide comfort that critical controls are adequately designed and operating effectively. – Operational Risk Capital Framework Macquarie uses the BIA to calculate a Pillar 1 Operational Risk Capital Requirement. To further assess the Operational Risk Capital requirements (under Pillar 2A), Macquarie uses a scenario-based methodology, in which judgement is applied to predict events that occur in the future It’s framework for managing operational risk capital has been developed to establish the level of capital required to be held for operational risk exposures and as a tool to encourage appropriate management of Macquarie’s day to day operational risk. – Business aligned Operational Risk Management (“BORM”) BORMs are appointed by the Macquarie business division heads to be their representative on operational risk management matters, and act as their delegate in ensuring that operational risk is addressed appropriately within the Group. Structure and Organisation of the Operational Risk Function Most Macquarie operational risk staff operate at the business level. These Business Operational Risk Managers (BORMs) are responsible for embedding operational risk management within their business. They report directly to the relevant business and have a dotted reporting line to the Head of RMG Operational Risk. RMG Operational Risk is a division of RMG and is managed separately from other risk disciplines within RMG. RMG Operational Risk is responsible for ensuring the ORMF remains appropriate and that skilled resources are available to support it. It is also responsible for Macquarie’s operational risk capital measurement methodology.

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9.0 Exposure Classification and Credit Risk Mitigation

The external credit ratings of MCEL’s exposures to corporates, institutions and sovereigns have been mapped to credit quality steps to determine the appropriate risk weights according to FCA guidance. – MCEL has a non-significant investment in a non-financial sector company which is risk weighted at 100%. The equity exposures are measured at fair value. For further details on the on the equity investments in MCEL refer to the MCEL financial accounts note 11 on the Companies House Website. – As at 31 March 2019, MCEL’s credit risk capital requirement amounted to £16.2m. – Rating agencies used by Macquarie are Moody’s, Standard & Poor’s and Fitch. MCEL complies with Macquarie Group policy with regards to balance sheet netting arrangements. The tables below illustrates the balance sheet exposure values by risk weight, before and after application of credit risk mitigation. Past due fees receivable are assigned to the category ‘Exposures in default’ and are assigned a risk weight of 150%. Table 4: Exposure post credit risk mitigation ("CRM") and average exposure 31 March 2019 31 March 2018 Exposure Average Exposure Exposure Average Exposure Post CRM Post CRM1 Post CRM Post CRM Exposure Class £'m £'m £'m £'m Central governments or central banks 5.7 7.7 7.3 7.4 Claims on institutions and corporate with a 27.4 50.9 66.5 35.1 short-term credit assessment Corporates 173.9 88.4 85.5 50.8 Equity Exposures 4.5 3.0 0.5 0.5 Exposures in default 1.1 2.5 2.1 1.7 Institutions 30.7 35.5 170.5 85.3 Other items 0.9 19.9 0.5 0.6 Grand Total 244.2 207.9 332.9 181.1

1 Average exposure post CRM shows the average exposure is calculated over the four quarters to 31 March 2019

15 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 9.0 Exposure Classification and Credit Risk Mitigation continued

Table 5: Exposures pre and post credit risk mitigation and risk weighted exposures by exposure classes and risk weights as at 31 March 2019 Exposure Exposure pre-credit risk post-credit risk Capital Post CRM Risk mitigation mitigation requirements Exposure Class Weight £'m £'m £'m Central governments or central banks 0% 4.1 4.1 - 100% 1.6 1.6 0.1 Claims on institutions and corporates with a 20% 0.9 0.9 0.0 short-term credit assessment 50% 99.0 26.6 1.1 100% 0.1 - - Corporates 20% - - - 50% - - - 100% 173.8 173.8 13.9 Equity Exposures 100% 4.5 4.5 0.4 Exposures in default 150% 14.7 1.1 0.1 Institutions 20% 29.1 29.1 0.5 50% 1.6 1.6 0.1 Other items 20% 0.4 0.4 0.0 100% 0.6 0.6 0.0 Grand Total 330.3 244.2 16.2

Table 6: Exposures pre and post credit risk mitigation and risk weighted exposures by exposure classes and risk weights as at 31 March 2018 Exposure Exposure pre-credit risk post-credit risk Capital Post CRM Risk mitigation mitigation requirements Exposure Class Weight £'m £'m £'m Central governments or central banks 0% 5.6 5.6 - 250% 1.7 1.7 0.4 Claims on institutions and corporates with a 20% 54.1 8.4 0.1 short-term credit assessment 50% 5.5 55.6 2.2 100% 2.5 2.5 0.2 Corporates 20% 0.0 0.0 0.0 50% - 0.2 0.0 100% 135.5 85.3 6.8 Equity Exposures 100% 2.4 0.5 0.0 Exposures in default 150% 2.1 2.1 0.3 Institutions 2% 102.4 102.4 0.2 20% 11.8 11.8 0.2 50% 56.3 56.3 2.3 Other items 100% 0.5 0.5 0.0 Grand Total 380.4 332.9 12.7

*Exposure pre-credit risk mitigation include the amount that is provisioned for “Exposures in Default” class

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9.0 Exposure Classification and Credit Risk Mitigation continued

Table 7: Geographic and Exposure Class Breakdown of Exposures and Credit Risk Capital Requirements 31 March 2019 31 March 2018 Exposure Credit Risk Exposure Credit Risk pre-credit risk Capital pre-credit risk Capital Geographic mitigation Requirements mitigation Requirements Exposure Class Location £'m £'m £'m £'m Central governments or Australia - - - - central banks Europe 5.7 0.1 7.3 0.3 Claims on institutions and Australia 99.0 1.1 54.8 2.3 corporate with a short-term Asia - - 0.0 0.0 credit assessment Europe 0.9 0.0 7.4 0.3 Corporates Americas 2.1 0.2 0.8 0.1 Asia 0.5 0.0 0.2 0.0 Australia 149.6 12.0 116.7 5.3 Africa - - - - Europe 21.6 1.7 17.8 1.4 Equity Exposures Europe 4.5 0.4 2.4 0.0 Exposures in default Americas - - 0.0 - Asia 0.2 0.6 - Europe 14.5 0.1 1.5 0.2 Institutions Americas 0.2 0.0 44.2 1.8 Europe 28.9 0.5 114.3 0.4 Australia 1.6 0.1 12.0 0.5 Australia 0.3 0.0 0.0 0.0 Other items Americas 0.0 0.0 - - Europe 0.7 0.0 0.5 0.0

Grand Total 330.3 16.2 380.4 12.7

Table 8: Post-CRM Exposure by Industry Type

31 March 2019 31 March 2018 Industry Type £'m £'m Administrative and support services - - Bank 23.4 69.3 Central Government 5.7 7.3 Electricity, Gas and Water supply 3.0 2.0 Financial Intermediaries and auxiliary services 201.9 238.9 Industrials 0.0 0.0 Infrastructure 2.3 0.0 Manufacturing 2.7 1.5 Other 0.6 10.4 Real Estate - 0.1 Resources 4.7 0.8 Transportation, Storage and Communication - 2.6 Grand Total 244.2 332.9

17 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 9.0 Exposure Classification and Credit Risk Mitigation continued

Table 9: Post-CRM Exposure by Residual Maturity 0-3 3-6 6-12 1-5 > 5 Exposure post- credit risk mitigation post-CCF (£'m) Months Months Months Years Years N/A Total Exposure class Central governments 4.1 1.6 5.7 Claims on institutions and corporate with a short-term credit 27.4 27.4 assessment Corporates 173.9 173.9 Institutions 29.1 1.6 - 30.7 Equity 4.5 4.5 Default 0.6 0.5 1.1 Other items 0.8 0.1 0.9 Total 235.3 1.6 0.6 0.5 - 6.2 244.3

Table 10a: Pre-CRM Exposure by ECAI Credit Quality Steps Exposure Class (£'m) Unrated 1 2 3 4 5 Other Central governments or central banks - 4.1 - - - - 1.6 Claims on institutions and corporate with a short-term - 0.9 99.1 - - - - credit assessment Corporates 173.8 ------Equity Exposures 4.5 ------Exposures in default ------14.7 Institutions 28.7 0.3 1.7 - - - - Other items 0.7 - 0.2 - - - - Grand Total 207.7 5.3 101.1 - - - 16.3

Table 10b: Post-CRM Exposure by ECAI Credit Quality Steps Exposure Class (£'m) Unrated 1 2 3 4 5 Other Central governments or central banks - 4.1 - - - - 1.6 Claims on institutions and corporate with a short-term - 0.9 26.6 - - - - credit assessment Corporates 173.8 ------Equity Exposures 4.5 ------Exposures in default ------1.1 Institutions 28.7 0.3 1.7 - - - - Other items 0.7 - 0.2 - - - - Grand Total 207.7 5.3 28.5 - - - 2.7

Note the derivatives contracts in MCEL were immaterial as at 31 March 2019 with a Fair value of negative £198k. The Potential Future Credit exposure (“PFCE”) was £1.6m. No significant netting or other CRM benefits were achieved.

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10.0 Leverage ratio

Risk of excessive leverage means the risk resulting from an institution's vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets. Leverage is the extent to which a firm funds its assets with borrowings rather than equity. More debt relative to each dollar of equity means a higher level of leverage. Excessive leverage is measured by a leverage ratio. The leverage ratio measures the extent to which a firm has financed its assets with equity. It does not matter what those assets are, or what their risk characteristics are. Leverage ratios effectively place a cap on borrowings as a multiple of a firm’s equity. Basel III reforms introduced a leverage ratio into the regulatory framework. The leverage ratio is designed to serve as an important backstop to the risk-based capital measures by constraining the build-up of leverage in the banking system and providing an extra layer of protection against model risk and measurement error. The EBA Implementing Technical Standards on Supervisory Reporting for leverage ratio have been adopted and published in the EU official journal. The leverage ratio for MCEL is calculated as per Part 7 of the CRR but is not yet a binding regulatory requirement for MCEL. As at 31 March 2019, the leverage ratio was 17.1%. Table 11: Table LRSum: Summary reconciliation of accounting assets and leverage ratio exposures 31 March 2019 31 March 2018 £'m £'m 1 Total assets as per published financial statements 1,126.6 1,124.1 2 Adjustment for entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation 3 (Adjustment for fiduciary assets recognised on the balance sheet pursuant to the applicable accounting framework but excluded from the leverage ratio exposure measure in accordance with Article 429(13) of Regulation (EU) No 575/2013 "CRR") 4 Adjustments for derivative financial instruments 1.6 146.6 5 Adjustments for securities financing transactions "SFTs" 20.6 1.2 6 Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet exposures) EU-6a (Adjustment for intragroup exposures excluded from the leverage ratio exposure measure in accordance with Article 429 (7) of Regulation (EU) No 575/2013) EU-6b (Adjustment for exposures excluded from the leverage ratio exposure measure in accordance with Article 429 (14) of Regulation (EU) No 575/2013) 7 Other adjustments (3.2) (12) 8 Total leverage ratio exposure 1,145.6 1259.9

19 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 10.0 Leverage ratio continued

Table 12: Table LRCom: Leverage ratio common disclosure 31 March 2019 31 March 2018 CRR leverage ratio exposures £'m £'m On-balance sheet exposures (excluding derivatives and SFTs) 1 On-balance sheet items (excluding derivatives, SFTs and fiduciary assets, but 1,031.9 1,064.3 including collateral) 2 (Asset amounts deducted in determining Tier 1 capital) (1.6) 3 Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary 1,030.3 1,054.3 assets) (sum of lines 1 and 2)

Derivative exposures 4 Replacement cost associated with all derivatives transactions (i.e. net of eligible - 12.9 cash variation margin) 5 Add-on amounts for PFE associated with all derivatives transactions (mark-to- 1.6 146.6 market method) EU-5a Exposure determined under Original Exposure Method 6 Gross-up for derivatives collateral provided where deducted from the balance sheet - 0 assets pursuant to the applicable accounting framework 7 (Deductions of receivables assets for cash variation margin provided in derivatives - (12) transactions) 8 (Exempted CCP leg of client-cleared trade exposures) 9 Adjusted effective notional amount of written credit derivatives 10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) 11 Total derivative exposures (sum of lines 4 to 10) 1.6 147.5

Securities financing transaction exposures 12 Gross SFT assets (with no recognition of netting), after adjusting for sales 93.1 46.9 accounting transactions 13 (Netted amounts of cash payables and cash receivables of gross SFT assets) 14 Counterparty credit risk exposure for SFT assets 20.6 1.2 EU-14a Derogation for SFTs: Counterparty credit risk exposure in accordance with Article 429b (4) and 222 of Regulation (EU) No 575/2013 15 Agent transaction exposures EU-15a (Exempted CCP leg of client-cleared SFT exposure) 16 Total securities financing transaction exposures (sum of lines 12 to 15a) 113.7 48.1

Other off-balance sheet exposures 17 Off-balance sheet exposures at gross notional amount - - 18 (Adjustments for conversion to credit equivalent amounts) - - 19 Other off-balance sheet exposures (sum of lines 17 to 18) - -

Exempted exposures in accordance with CRR Article 429 (7) and (14) (on and off balance sheet) EU-19a (Exemption of intragroup exposures (solo basis) in accordance with Article 429(7) of - - Regulation (EU) No 575/2013 (on and off balance sheet)) EU-19b (Exposures exempted in accordance with Article 429 (14) of Regulation (EU) No - - 575/2013 (on and off balance sheet))

Capital and total exposures 20 Tier 1 capital 196.0 208.7 21 Total leverage ratio exposures (sum of lines 3, 11, 16, 19, EU-19a and EU-19b) 1,145.6 1,259.9

Leverage ratio 22 Leverage ratio 17.1% 17.0%

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10.0 Leverage ratio continued

Table 13: Table LRSpl: Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures) 31 March 2019 31 March 2018 CRR leverage ratio exposures £'m £'m EU-1 Total on-balance sheet exposures (excluding derivatives, SFTs, and 1,031.9 1,064.3 exempted exposures), of which: EU-2 Trading book exposures 823.3 901.3 EU-3 Banking book exposures, of which: 208.6 163.0 EU-4 Covered bonds EU-5 Exposures treated as sovereigns 5.7 7.3 EU-6 Exposures to regional governments, MDB, international organisations and PSE NOT treated as sovereigns EU-7 Institutions 0.4 - EU-8 Secured by mortgages of immovable properties EU-9 Retail exposures EU-10 Corporate 173.9 135.3 EU-11 Exposures in default 14.7 2.1 EU-12 Other exposures (e.g. equity, securitisations, and other non-credit 13.9 18.3 obligation assets)

LRQua: Disclosure on qualitative items Description of the processes used to manage the risk of excessive leverage MCEL’s leverage ratio calculated and monitored by the Financial Management Group. Although there is no minimum binding leverage ratio value yet, an internal benchmark is adhered to. New transactions or business activities which may have a material impact to MCEL’s leverage ratio will be assessed as part of the NPBA process (see Section 2). Description of the factors that had an impact on the leverage ratio during the period to which the disclosed leverage ratio refers MCEL’s Leverage Ratio as at 31 March 2019 remains in line with the Leverage Ratio as at 31 March 2018. The key movement in factors that impact Leverage Ratio relate to derivatives. The derivatives exposures has dropped significantly as the Macquarie Commodities Trading business that traded commodities derivatives has moved out of MCEL during the course of FY19.

21 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 11.0 Asset Encumbrance

As per the guidelines issued pursuant to Article 16 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (the EBA Regulation) and in accordance with Article 16(3) of the EBA Regulation, an investment firm is required to disclose information on encumbered and unencumbered assets. An asset shall be treated as encumbered if it has been pledged or if it is subject to any form of arrangement to secure, collateralise or credit enhance any transaction from which it cannot be freely withdrawn. Table 14: Template A – Assets Carrying amount of Fair value of Carrying amount of Fair value of encumbered assets encumbered assets unencumbered assets unencumbered assets of which of which of which of which notionally eligible notionally eligible EHQLA and EHQLA and EHQLA and EHQLA and HQLA HQLA HQLA HQLA 10 30 40 50 60 80 90 100

10 Assets of the reporting 57.1 1,069.5 institution 30 Equity instruments 31.4 31.4 11.1 11.1 40 Debt securities 50 of which: covered bonds 60 of which: asset-backed securities 70 of which: issued by general governments 80 of which: issued by financial corporations 90 of which: issued by non- financial corporations 120 Other assets 25.7 1,058.4

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11.0 Asset Encumbrance continued

Table 15: Template B – Collateral received The following below table discloses information on collateral received by MCEL that is off balance sheet

Unencumbered Fair value of encumbered collateral Fair value of collateral received or own received or own debt securities issued debt securities issued available for encumbrance of which notionally eligible EHQLA of which EHQLA and HQLA and HQLA 10 30 40 60 Collateral received by the reporting institution 37.7 51.9

Loans on demand Equity instruments 37.7 6.8 Debt securities 45.1 45.1 of which: covered bonds of which: asset-backed securities of which: issued by general governments 45.1 45.1 of which: issued by financial corporations of which: issued by non-financial corporations Loans and advances other than loans on demand Other collateral received of which: … Own debt securities issued other than own covered bonds or asset-backed securities Own covered bonds and asset-backed securities issued and not yet pledged Total assets, collateral received and own debt securities issued

Table 16: Template C – Sources of encumbrance The following table show sources of encumbrance for the period ended 31 March 2019:

Matching liabilities, Assets, collateral received and own contingent liabilities or debt securities issued other than securities lent covered bonds and ABSs encumbered £m 010 Carrying amount of selected financial liabilities - - 170 Total sources of encumbrance - 94.8

D – Information on importance of encumbrance Assets are considered encumbered when they have been pledged or used to secure, collateralise or credit enhance a transaction which impacts their transferability and free use. The sources of encumbrance in MCEL comprise of the lent in relation to the Equities instruments and failed trades in the “Other assets” category.

23 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com 12.0 Capital Buffers

Capital Buffers Institutions are required to hold a capital conservation buffer and a counter-cyclical capital buffer to ensure that sufficient capital is accumulated during periods of economic growth to absorb losses in stressed periods. MCEL holds capital buffers in accordance with IFPRU 10. Capital Conservation Buffer MCEL holds a CCoB of 2.5% of the RWAs in the form of CET1 from 1 January 2019. Counter-cyclical Buffer (“CCyB”) Institution-specific counter-cyclical capital buffer is calculated as a weighted average of the counter-cyclical buffer rates that apply in the countries where the relevant credit exposures are located. Each member state designates an authority responsible for setting the counter-cyclical buffer rate in that member state on a quarterly basis, taking into account the growth of credit levels and changes to the ratio of credit to GDP. The Financial Policy Committee (“FPC”) of the Bank of England is responsible for setting the rate in the UK. MCEL will hold additional capital in respect of exposures with countries as and when the FPC prescribes the CCyB rate. At 31 March 2019, the applicable CCyB rates in force were 2% set by Norway, 2% set by Sweden, 1.25% set by Iceland, 0.5% set by Denmark, 2.5% set by , 1.25% set by Slovakia and 1.% set by United Kingdom. MCEL’s own funds requirements for CCyB are immaterial as it has limited exposures to countries with a prescribed CCyB rate. Table 17: Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer 31 March 2019: General credit + Trading book exposures Own funds requirements Credit Sum of long and short of which: of which: of which: Counter- Exposure positions of trading General credit Trading book Securitisation Own funds cyclical value for SA book exposures for SA exposures exposures exposures Total requirements capital buffer £’m £’m £’m £’m £’m £’m weights rate Breakdown by country: Hong Kong 0.0 0.7 0.0 0.1 0.1 0.3% 2.5% Denmark 2.6 0.2 0.2 1.0% 0.5% Norway 0.1 0.0 0.0 0.1% 2.0% Sweden 1.4 0.1 0.1 0.5% 2.0% United Kingdom 20.6 25.6 1.6 2.0 3.7 18.3% 1.0%

Total 20.6 30.4 1.6 2.4 4.1

£'m Total risk exposure amount 619.8 Institution specific countercyclical capital buffer rate 0.21% Institution specific countercyclical capital buffer requirement 1.28

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Disclosure

– The material in this document has been prepared by Macquarie Capital (Europe) Limited, Company number 03704031 (“MCEL”) purely for the purpose of explaining the basis on which MCEL has prepared and disclosed certain capital requirements and information about the management of risks relating to those requirements and for no other purpose. Information in this document, including any forward looking statements, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments (the “Investment Activity”) and does not take into account investors’ or potential investors’ particular investment objectives, financial situation or needs. Before acting on any information investors and potential investors should consider the appropriateness of information having regard to the Investment Activity, any relevant offer document and in particular, investors and potential investors should seek independent financial advice. No representation or warranty is made as to the accuracy, completeness or reliability of the information. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. – This document may contain forward looking statements that is, statements related to future, not past, events or other matters – including, without limitation, statements regarding our intent, belief or current expectations with respect to MCEL’s businesses and operations, market conditions, results of operation and financial condition, capital adequacy, individually assessed provisions for impairment and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. MCEL does not undertake any obligation to publicly release the result of any revisions to these forward looking statements or to otherwise update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this document. Actual results may vary in a materially positive or negative manner. Forward looking statements and hypothetical examples are subject to uncertainty and contingencies outside MCEL’s control. Past performance is not a reliable indication of future performance. Unless otherwise specified all information is at 31 March 2019. – Although Pillar 3 disclosures are intended to provide transparent disclosures on a common basis the information contained in this document may not be directly comparable with the information of other firms. This may be due to a number of factors such as: – the mix of business exposures differs between firms; and – the fact that Pillar 2 capital requirements are excluded from this disclosure but play a major role in determining both the total capital requirements of the firm and any surplus capital available.

25 Macquarie Capital (Europe) Limited Pillar 3 Disclosures March 2019 macquarie.com Appendix 1

(B) REGULATION 31 March 2019 (EU) No 575/2013 Capital Adequacy £m ARTICLE REFERENCE Capital instruments and the related share premium accounts 338.7 26 (1), 27, 28, 29, EBA list 26 (3) of which: Instrument type 1 338.7 EBA list 26 (3) Retained earnings (140.6) 26 (1) (c) Accumulated other comprehensive income (and any other reserves) (2.1) 26 (1) Funds for general banking risk - 26 (1) (f) Amount of qualifying items referred to in Article 484 (3) and the related share - 486 (2) premium accounts subject to phase out from CET1 Public sector capital injections grandfathered until 1 January 2018 - 483 (2) Minority interests (amount allowed in consolidated CET1) - 84, 479, 480 Independently reviewed interim profits net of any foreseeable charge or dividend - 26 (2)

Common Equity Tier 1 (CET1) capital before regulatory adjustments 196.0

Common Equity Tier 1 (CET1) capital: regulatory adjustments Total regulatory adjustments to Common Equity Tier 1 (CET1) - Common Equity Tier 1 (CET1) capital 196.0 Total regulatory adjustments to Additional Tier 1 (AT1) capital - Additional Tier 1 (AT1) capital - Tier 1 capital (T1 = CET1 + AT1) 196.0 Total regulatory adjustments to Tier 2 (T2) capital - Tier 2 (T2) capital - Total capital (TC = T1 + T2) 196.0

Total risk-weighted assets 619.8

Capital ratios and buffers Common Equity Tier 1 (as a percentage of total risk exposure amount 31.6% 92 (2) (a), 465 Tier 1 (as a percentage of total risk exposure amount 31.6% 92 (2) (b), 465 Total capital (as a percentage of total risk exposure amount 31.6% 92 (2) (c) Institution specific buffer requirement (CET1 requirement in accordance with article 16.8 CRD 128, 129, 140 92 (1) (a) plus capital conservation and countercyclical buffer requirements plus a systemic risk buffer, plus systemically important institution buffer expressed as a percentage of total risk exposure amount) of which: capital conservation buffer requirement 15.5 of which: countercyclical buffer requirement 1.3 of which: systemic risk buffer requirement - of which: Global Systemically Important Institution (G-SII) or Other Systemically - CRD 131 Important Institution (O-SII) buffer Common Equity Tier 1 available to meet buffers 23.6% CRD 128 (as a percentage of risk exposure amount)

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Appendix 1 continued

Capital instruments’ main features template Disclosure according to Article 3 in Commission implementing regulation (EU) No 1423/2013

Capital instruments’ main features template (1) 1 Issuer MCEL 2 Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private N/a placement) 3 Governing law(s) of the instrument UK Regulatory treatment 4 Transitional CRR rules CET1 5 Post-transitional CRR rules CET1 6 Eligible at solo/(sub-)consolidated/solo & (sub-)consolidated Solo 7 Instrument type (types to be specified by each jurisdiction) Ordinary Shares 8 Amount recognised in regulatory capital (currency in million, as of most recent 331.6 reporting date) 9 Nominal amount of instrument 331.6 9a Issue price 1 9b Redemption price 1 10 Accounting classification Called Up Share capital 11 Original date of issuance June 29, 1999 12 Perpetual or dated Perpetual 13 Original maturity date No Maturity Date 14 Issuer call subject to prior supervisory approval N/a 15 Optional call date, contingent call dates and redemption amount N/a 16 Subsequent call dates, if applicable N/a Coupons / dividends 17 Fixed or floating dividend / coupon N/a 18 Coupon rate and any related index N/a 19 Existence of a dividend stopper No 20a Fully discretionary, partially discretionary or mandatory (in terms of timing) Fully discretionary 20b Fully discretionary, partially discretionary or mandatory (in terms of amount) Fully discretionary 21 Existence of step up or other incentive to redeem No 22 Noncumulative or cumulative Non-cumulative 23 Convertible or non-convertible Non-convertible 24 If convertible, conversion trigger(s) N/a 25 If convertible, fully or partially N/a 26 If convertible, conversion rate N/a 27 If convertible, mandatory or optional conversion N/a 28 If convertible, specify instrument type convertible into N/a 29 If convertible, specify issuer of instrument it converts into N/a 30 Write-down features N/a 31 If write-down, write-down trigger(s) N/a 32 If write-down, full or partial N/a 33 If write-down, permanent or temporary N/a 34 If temporary write-down, description of write-up mechanism N/a 35 Position in subordination hierarchy in liquidation (specify instrument type N/a immediately senior to instrument) 36 Non-compliant transitioned features No 37 If yes, specify non-compliant features N/a (1) 'N/A' inserted if the question is not applicable

27